If you are a long term investor, you tend to always make returns in equities. In fact, equity shares have known to outperform other asset classes in the long term. We have selected a few stocks that offer great opportunities for long term investors. These include stocks that have a very low debt to equity ratio and which have shown good growth over the years. These stocks have the tremendous potential to generate money in the long term. We are recommending one housing finance company, as we believe that the NBFC worries are now behind us.
Here are a few stocks that are from sectors such as mining and banking.
Jammu and Kashmir Bank
Jammu and Kashmir Bank is probably one of the cheapest banking stocks to own from the private sector space. The stock has fallen from levels of Rs 95 to the current levels of Rs 41.
The bank has a very dominant share in its home state of Jammu and Kashmir, with 85 per cent of its deposit from the home state. This protects the bank from interest rate competition with other banks to a certain extent.
Over the last few years, Jammu and Kashmir Bank has managed to improve its net interest margins to 4 per cent, from the earlier three per cent. Most of the banking stocks have rallied in the last few weeks on hopes of a swift resolution to non performing assets. This has also led to some uptick in the stock of Jammu and Kashmir Bank.
Jammu and Kashmir Bank: Non performing assets to moderate
Jammu & Kashmir Bank reported a solid set of quarterly numbers for the period ending March 31, 2019.
The bank reported a net profit of Rs 215 crores, as against Rs 103.75 crore for the period ending Dec 31, 2018. Thus the bank doubled its net profits. However, the gross non performing assets deteriorated slightly to 4.89.
The bank reported an EPS of Rs 3.86 for the said period. If we assume that the bank does an EPS of Rs 12 for 2019-20, the stock if trading at a p/e of just 5 times. This is exceedingly cheap. As non performing assets improve, it is likely that the stock could get re-rated. It makes sense to buy into the stock now.
There were some problems at the bank that were largely related to Nepotism and corruption. However, the bank was swift to clarify. The one good advantage of any adverse news is that we get to buy good quality stocks for the long term.
TV Today Network
TV Today Network is among the top media houses in the country. It runs popular news channels like Aaj Tak, Tez and India Today, apart from interests in radio and digital.
Recently, the company wanted to sell its radio business, however, it did not get the nod from the requisite authorities. The digital business has been growing at a brisk pace, though the radio business needs to improve significantly.
For the quarter ending March 2019, TV Today Network's numbers were not too encouraging. The company was largely hit on account of new tariff order.
However, going ahead we expect a vastly improved performance as the company looks to consolidate its position.
TV Today Network: Stock near 52 week lows
The company's share prices has dipped substantially from levels of Rs 489, to the current levels of Rs 272. The stock is just 5 per cent above its 52-week low of Rs 258. At the current price the downward risk to the stock is minimal, given the already huge fall.
In fact, the company can report an EPS of Rs 22 by 2019-20, which makes the stock available at a p/e of just 13 times. It is also important to remember that media stocks receive a good discounting on the bourses and hence if we apply a discounting of 18 to 20 times, the stock has the potential to generate 40 per cent returns in 2-years time.
One can buy this stock from a long-term perspective.
IndiaBulls Housing Finance
This stock has dived from levels of Rs 1,400 to the current levels of Rs 730. At the current market price the stock gives a cool dividend yield of decent 5.5 per cent.
The shares have fallen, following worries over the IL&FS crisis and then some adverse reports on DHFL. IndiaBulls Housing continues to perform well.
For the quarter ending March 31, 2019, the company reported a 6.9 per cent year-on-year (YoY) drop in net profit at Rs 1001 crore.
The company continues to believe that it will deliver strong growth in the coming quarters. In fact, the management is confident that it would achieve a growth of 17-19 per cent in the coming quarters.
The Gross NPAs of the company was also low for the quarter ending March 31, 2019. Recently, the housing finance company also has declared a merger with Lakshmi Vilas Bank. The share swap ratio of 0.14:1, or 14 shares of India Bulls Housing for every 100 shares of LVB has been agreed upon by the respective boards of directors.
However, this is subject to approval from the Reserve Bank of India.
Indiabulls Housing Finance: Cheap on the valuations front
Valuations of IndiaBulls Housing is not very expensive. In fact, by 2020-21, the company should be in a position to report an EPS of Rs 120. This means the shares are trading at a p/e of just 5.5 times one year forward earnings.
This is exceedingly cheap. The price to book of the company is at 1.90 times. The dividend yield of 5.25 per cent also makes the stock attractive. In fact, the company declares a dividend four times each year.
IndiaBulls Housing Finance is a good stock to own and we believe that the stock should double investors wealth in the coming years.
Coal India: Great on dividend yields
The shares of Coal India have suddenly seen a sharp fall to almost a 52-week low of Rs 232 and have recovered marginally.
The company declared a dividend of Rs 7.50 per share in Dec and has now announced a buyback of shares. The proposed buyback of up to 4,46,80,850 fully paid up Equity Shares would be at a price of Rs. 235 Per Equity Share for a maximum amount of Rs. 1,050 Crores through the tender process.
There are many reasons to buy Coal India. The first and the foremost reason is that we believe that the downside risk to the stock is limited, given its ability to declare solid dividends.
It is likely that we may see Coal India, declare a total dividend of at least Rs 16 to 18 per share for FY 2019-20.
Let us assume you buy the stock at a price of Rs 248 and the firm declares a total dividend of Rs 16 per share. You get a dividend yield of near 6.8 per cent and that too tax free, up to Rs 10 lakhs dividend.
Coal India: Not too expensive
There are many other reasons to buy the shares of Coal India as well. The company is a cash rich company, with solid coal reserves.
It faces very limited business risks. The stock is also available at a price to earnings of less than 10 times, which makes it an attractive bet. With wage hikes now behind and e-auction prices expected to be much better, the shares of Coal India can jump. With risk from elections rather high, it would be a good idea to bet on a stock like Coal India, which provides steady dividends.
If one is looking at regular income by way of dividends, both the stocks of IndiaBulls Housing Finance and Coal India could be very good bets. Buy these stocks for the long term.
Yes Bank maybe a good contrarian bet from a 2-year holding perspective. The bank reported a poor set of quarterly numbers, which led to a series of downgrades from brokerage firms.
Yes Bank reported a net loss of Rs 1,507 crores for the quarter ending March 31, 2019. However, the results reflect a very conservative approach by the new CEO. What this means that once the mess has been cleaned up, it would start with a clean slate, though there maybe some constraints going forward.
Yes Bank has set for itself loan growth target of around 24 to 26 per cent, while retail loans are expected to be around 30 per cent. In fact, retail loans would be a key thrust area for the bank. In the next five years, Yes Bank expects to sizeably have a 50 per cent contribution from the retail sector.
The Bank should do an EPS of near Rs 15 by 2020-21. Valuing the same at a conservative estimate of around 15 times, the stock should trade at Rs 225 at the very least in the next two years. This is pretty decent gains from the current levels of close to Rs 160. A good stock to buy from a long to medium term perspective.
Best small cap stocks to buy
In the past some small cap and mid cap stocks have given excellent returns. In fact, small cap stocks have beaten returns from large cap stocks, which have made them excellent bets for the long and short term. Please click on the link to see some excellent small cap stocks ideas.
The article is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author owns shares in Jammu and Kashmir Bank.